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Rising Wages in Asia Increase Prices of Goods

June 3, 2011

Rising wages in China are confronting trading companies and Western retailers with cost increases and are making higher prices likely for American and European consumers, according to the New York Times.

Bruce Rockowitz, the chief executive of Li & Fung, the largest trading company supplying Chinese consumer goods to American retail chains, said in a speech that the company’s average costs for goods rose 15 percent in the first five months of this year compared with the same period last year. Executives at other consumer goods companies have encountered similar or larger increases.

Bangladesh raised its minimum wage by 87 percent late last year, yet apparel factories there are still struggling to find enough workers to complete ever-rising numbers of orders. “Everywhere you see signs saying ‘people wanted,’” Annisul Huq, the chairman of the Mohammadi Group, a large Bangladesh garment manufacturer, told the Times.

Workers in developing countries all over the world are becoming more aware of pay elsewhere through the Internet and the use of social media like Facebook, increasing the pressure for higher wages, Rockowitz said.

Rising wages and strengthening currencies in Asia are making it less attractive to move higher-value industries like auto manufacturing out of the West. But, no one making or trading consumer goods in Asia has mentioned the possibility of moving these relatively labor-intensive manufacturing industries back to the United States or Europe.